IM Inside Edge

By Mike O'Driscoll
Published: Friday, 09 November 2012

Imerys, Goonvean, RHI, refractory bauxite, fused magnesia, all change in China and US

IM Inside Edge

Welcome to approximately 60 seconds of reading Mike O’Driscoll’s take on this week’s news highlights in the industrial minerals world.

Imerys: bauxite, kaolin

“Remember, remember the fifth of November” is England’s way of recalling Guy Fawkes’ plot to blow up King James I of England and IV of Scotland at the State Opening of Parliament in 1605.

Well, those that spotted the expansive five and half lines buried in page 2 of Imerys’ nine-month financial report may now remember the date for other reasons: the acquisition of Goonvean, the UK’s sole remaining independent kaolin producer, and the acquisition from Vale of MSL Minerais – Brazil’s former refractory bauxite producer.

Both moves by Imerys make total sense, perhaps it’s just surprising how long it has taken to come to fruition.

Although Goonvean reacted smartly to the disastrous impact on traditional kaolin markets worldwide in recent years (ie. paper, ceramics) by pursuing niche speciality markets for kaolin (eg. adhesives, coatings), as reported in July 2011, clearly this wasn’t enough and Goonvean was unable to roll with the hit as could the bigger players such as Imerys and Sibelco.

On the bauxite front, given the intense interest in aluminosilicates from the refractories and latterly proppants markets owing to limited supply sources and dominance by China, I have found it astonishing that the Pará bauxite reserves and former assets of MSL Minerais have not been acquired by anyone sooner. MSL’s last shipment was December 2003 then operations ceased.

Sure, the ex-CAEMI reserves and two rotary kiln operation of 145,000 tpa capacity in Almeirim is in the thick of the Pará jungle near the mouth of the Amazon. And yes, the refractory bauxite grade was a touch high on silica content. But as an alternative to the only two other sources in the world – China and Guyana (now Chinese owned!) – it was the only game in town, and it had demand in some niche refractory applications. Why has it been ignored until now?

The news will certainly give First Bauxite’s development of its Guyana bauxite the hurry up, and with Imerys’ recent enthusiasm for penetrating the ceramic proppants market (new plant in Georgia ramping up now) it will be interesting to see how it utilises the MSL bauxite – check the positive vibes coming out of Argentina and Brazil on the outlook for shale gas and oil plays.

Magnesia

Just to note RHI was bang on schedule with world’s largest fused magnesia plant in Norway at 85,000 tpa: now 100% self-sufficient on FM, and crucially, no need for Chinese imports. Watch out for Magnezit’s unrolling of its FM expansions in Satka and Razdolinsk which would make it the world’s largest FM producer.

A thought: with all this captive FM capacity coming on line, as/when the respective in-house FM demand drops, will stocks get sold on to the world market? How will Chinese FM exporters react to that?

China, US: plus ça change?

And finally, a week of drama at the top of the two economic superpowers China and the US. Obama is confirmed back in the White House while in all likelihood China will welcome Xi Jinping as president when the 18th Communist Party Congress ends next Wednesday. Will anything change?

Each have their respective economies at the top of their agendas, and any policy change will affect industrial mineral markets. Look out for impact on energy strategies (shale gas, electric vehicles, solar, wind power) and reform in trade policies.

On a side note, China is consistent with its highly educated leadership strategy: Xi Jinping is a chemical engineer, and is expected to replace Hu Jintao as president, trained in hydraulic engineering.

Wen Jiabao, premier, trained in geomechanics, will step down and is expected to be replaced by Li Keqiang, holding a PhD in economics and master's and bachelor's degrees in law.

So this time economics on equal footing with science among China’s top leaders, perhaps an acknowledgement for the demands for economic reform.

And of Hu’s parting warning of the corruption endemic in China requiring urgent attention – a farewell to mineral smuggling circumventing the ailing export licence system, itself likely to experience radical change in 2013?

Mike O’Driscoll is Global Head of Research and Consultant Editor at Industrial Minerals, previously he was Editor of IM 1995-2012.

T: +44 20 7827 6444; modriscoll@indmin.com



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